Essay: Importance Of Strategy Tools For Business Orgs.

Discussion of Strategy Tools

Write an essay explaining what the main strategy development tools are and how they are used in business.

Your essay must contain a comprehensive discussion of 4 of the following: PESTEL, Five Forces, Resource-Based View, PROFIT, Input/Output, SWOT Analysis (you may include Cross Impact Analysis), Generic Strategies, Ansoff, Ghemawat, with reference to academic journals and practical examples from industry.

Be sure to use paragraphing. In this essay, sub-headings are permitted.

Be sure to reference your sources in-text and provide a list of references at the end in Harvard style.

Please type in Times New Roman 12 point with 1.5 line spacing and page numbers.

Ensure your Student Number and Name appears on the Cover Sheet.

The Significance of PESTEL Analysis

Strategic management is important for the contemporary business organizations due to the reason that competition is high in the current time and effective strategic management strategies can help the organizations to stay ahead in the competition (Hill, Jones and Schilling 2014). However there are number of strategic management tools available for the business organizations and each of the organizations use different tools based on their external situations. This essay will discuss about four major strategic tools namely PESTLE, Porter’s five forces, generic strategies and Ansoff’s matrix. Practical examples for each of the tools will also be discussed in this essay.

Pestle analysis is one of the most popular strategic management tools being used by the business organizations. The major objective of using this tool is to identify and evaluate the challenges and opportunities that may get originates from the external business environments. In the current time, most of the business organizations are entering in the foreign markets for increasing their market share and revenue (Ho 2014). However, in order to effectively operate in the foreign country, the external business factors should be determined. In this case, pestle will be beneficial for the organizations. The first element of this tool is political environment that determines the political risks and opportunities in doing business in the particular foreign country. For example, Vitex is a fully Australian pharmaceutical company operating in the Australian market. If they are willing to operate in Indian market, the political element will help them to identify the major political factors.

The next element is economical factor that will help Vitex to analyze the economical factors such as competition and economy growth of India. Social factors will help to identify the social trend and requirement of the Indian market. Technological factors will help to determine the advantages or disadvantages that they will gain from operating in the Indian market in terms of technological infrastructure (Utami and Lantu 2014). Legal factors will help Vitex to understand the legal rules and regulations that they have to follow in doing business in the Indian market. Lastly, environmental factors will determine the environmental standards to be followed by Vitex in doing business in India. Thus, it can be concluded that pestle analysis can help the organizations in having the fair understanding about the target market.

This tool is mainly used to understand the industry competitiveness of the organizations. As discussed earlier, the current business scenario is highly competitive in nature and thus it is important to identify the major competing factors in the industry and that are having influences. Ostuka pharma is another Australian pharmaceutical company (E. Dobbs 2014). In order to identify the industry competitiveness where they are operating, porter five forces will be beneficial. The first element of this tool is bargaining power of the buyers. This defines the extent to which buyers are having upper hand in price bargaining with Ostuka pharma. They should initiate their strategies in accordance to that. The next element is bargaining power of the suppliers. This refers to the extent to which suppliers can influence the business of Ostuka pharma. They should initiate their supplier management strategy accordingly.

Five Forces Analysis for Industry Competitiveness

The next element is threat of substitutes. This refers to the extent to which Ostuka pharma is facing or will face the competition from the substitute products. Accordingly, they have to redesign their product strategy. The next element is threat of new entrants. This refers to the degree to which new entrants can enter in the market and increase the competition. Accordingly, Ostuka pharma should have to locate their source of gaining competitive advantages. The last element is competitive rivalry that refers to the degree of competition in the market and the extent to which the competitors are going to stay ahead in the market (Mathooko and Ogutu 2015). Thus, it can be concluded that porter five forces tool can help Ostuka pharma in determining the situation of the industry and can assist them in initiating their strategy. Moreover, this tool can also help Ostuka pharma in identifying the industry competitiveness for a foreign market they are targeting to enter.

This tool is mainly used in indentifying the sources of gaining competitive advantages by the business organizations. This is important due to the reason that in the current competitive business state of affairs, business organizations should have certain strategy to target their customers. Porter generic strategy states that there are mainly three strategies namely cost leadership, differentiation and market focus can be initiated by the organizations in targeting the customers effectively (Tanwar 2013). Toyota is one of the major carmakers operating in the Australian market. They should have the understanding about which strategy to be followed in attracting more customers. With the help of the cost leadership strategy, they should have to offer their products in lowest possible price by means of reducing the production cost and reducing the profitability. This can help Toyota in attracting majority of the customers by lowest price.

Product differentiation strategy refers to the approach of offering distinctive products in the market, which will be different from that offered by the competitors. Thus, with the help of this approach, Toyota should offer unique vehicles in the market that will be completely new for the customers (Liu and Zhang 2013). This will reduce the intensity of substitute products and help in attracting more customers. Market focus strategy refers to the process of targeting a single customer segment and offering products in accordance to their taste and preference pattern. This can help Toyota in having products that can effectively meet the requirement of a particular target segment. This will help them to be the market leader in the particular segment.

Porter's Generic Strategies for Gaining Competitive Advantages in the Market

Ansoff matrix refers to four major strategies that can help in increasing the market share and revenue for the organizations. Takeda pharmaceutical is another home grown company of Australia. According to Ansoff matrix, they are having four options with first being the product development. This refers to the policy of developing new products for the existing market to cater to different needs of different customer segments (Hussain et al. 2013). This can help Takeda pharmaceuticals in increasing their market share and revenue in the Australian market. The next element is market penetration that refers to the policy of introducing more variants of their existing products of Takeda pharmaceuticals to cater to different customer segments across price levels in their existing market. The next strategy is market development. With this policy, Takeda pharmaceuticals can enter a new and foreign market to have more market potentiality of their existing products and increasing the sales revenue and volume. The last strategy is diversification that refers to the policy of entering in new market with new products. Takeda pharmaceuticals can introduce new products in accordance to the requirement of a new market. This will enable to cater to different customer segments in new market.

Conclusion

Thus, it can be concluded that each of the tools are having different utilities that can help the business organizations in determining the market scenario for their existing market. On the other hand, this can also help them in identifying the opportunities and challenges in a new market prior to enter. Hence, business organizations are having fair and clear understanding about a particular market with the help of these strategic management tools that will help them in effectively operating in the long term.

Reference

Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.

Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., 2013. ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review, 2(2), pp.196-206.

Liu, Q. and Zhang, D., 2013. Dynamic pricing competition with strategic customers under vertical product differentiation. Management Science, 59(1), pp.84-101.

Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), pp.334-354.

Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.

Utami, R.M. and Lantu, D.C., 2014. Development competitiveness model for small-medium enterprises among the creative industry in bandung. Procedia-Social and Behavioral Sciences, 115, pp.305-323.